Life Insurance In Australia: Some Important Factors To Consider

When approaching the subject of life insurance in Australia, most are familiar with the general concept and why it might make sense to consider it. However, some people have questions about the finer details and any differences between policies. In this article, we will address some of the questions and other factors to be aware of before purchasing any life insurance policy. 

Life insurance in Australia vs income protection insurance

A major source of confusion among those seeking an insurance policy is the difference between income protection and life insurance policies. There are some similarities between them, but they bear little resemblance to each other fundamentally:

●       Income protection insurance — Designed to provide policyholders with a monthly payout if they cannot work due to an injury or illness. This amount is unlikely to be more than 70% of their basic salary and is made as direct, regular payments to the policyholder, who may distribute and use it as they wish. Beneficiaries are not taken into account with income protection insurance policies.

●       Life insurance — Specifically structured to provide financial relief to bereaved families when the policyholder is deceased or diagnosed with a terminal illness. The amount received varies but will be deposited as a lump sum for the family to use at their discretion. Some life insurance policies also make provisions for family members who must travel to visit their loved ones and might even cover therapy fees and other expenses for those affected.

Given that one of those policies is intended for use by the policyholder whilst incapacitated and the other is for when their life is effectively over, the policies are very different at their most basic level. Both offer excellent support for families in difficult circumstances, and it is common for individuals to have both types of policy in place concomitantly.

Factors affecting eligibility for life insurance in Australia

Life insurance is not automatically available to everybody who wishes to purchase it, with some notable excluding factors to be aware of, namely:

●       Pre-existing medical conditions – Your chosen insurer may insist on a medical check before offering you a life insurance policy if a serious pre-existing medical condition is an issue

●       Age restrictions — Most life insurance policies are only available to individuals aged between 18 and 73 years old

●       Citizenship or permanent residency — Life insurance in Australia is restricted to citizens or those with official permanent residency

●       Occupational hazards – Australia is not without its fair share of high-risk occupations, and insurers may well refuse to cover individuals engaged in the most dangerous activities

Reasons a life insurance claim may be denied

Insurance companies may deny any claim on a life insurance policy based on the following circumstances:

●       Suicide – If the policyholder is deceased as the result of a self-inflicted injury, any insurance company will view that as a reason to nullify the policy

●       Misrepresentation – Inaccurate or deliberately misleading information associated with any life insurance policy gives grounds for nullification. As does failure to disclose pertinent information or update the insurer of any change of circumstances

Conclusion

Life insurance is an important element of how many people view their financial responsibilities towards their loved ones. The right policy can represent a sensible, forward-thinking option and offer the policyholder a peace of mind that is priceless in itself.